February 2009

Economic Geology

Homestake, South Dakota (Part 4)

By
R. J. Cathro

“An accusation frequently leveled at the mining industry is that local people, towns and state received little in benefits from the extraction of irreplaceable natural resources. Homestake has been a clear exception on that score. The company stands in the forefront for its flair and equitable treatment of its workers and the town of Lead, and for its willingness to work with the state of South Dakota on an array of issues. From the days of George and Phoebe Hearst through World War II, paternalism in its best clothes has been a hallmark of the Homestake Mine and Lead. ‘The town is the Homestake and the Homestake is the town,’ commented one writer.”

~Smith, 2001

The Homestake mine was not only a great gold deposit that produced for over a century and contributed enormously to the science of economic geology. It was also the heart of a mining camp that served as a striking example of how a mining town such as Lead could be a fine place to live and work in. It was quite unlike other mining towns of that era in the American West. In the words of Malone (1986), “the great Homestake gold mine was a bit of an anomaly: from its beginnings in 1877 and lasting until the outbreak of World War II, the Homestake venture generated great profits for its investors and regular paychecks for the miners.”

The Homestake camp is a stark contrast to Butte, Montana, which will be the next camp to be described in this series. Both camps were founded on remote deposits that produced for over 100 years and made an internationally significant contribution to global production and geological knowledge. Moreover, both received their initial funding from the Hearst Syndicate and became the basis for multinational mining companies. The main difference between them was that Lead was a peaceful company town that was operated in a paternalistic manner, whereas Butte, which didn’t have a single, benevolent, corporate owner for the first several decades, became the epitome of the Wild West on steroids.

Lead was fortunate that the local environment was largely unharmed because the treatment process did not require a smelter. Modern amenities, such as professional fire and police services, paved streets, and excellent modern schools and hospitals, were introduced in Lead as soon as they appeared in larger cities. The company strongly encouraged home ownership by assisting with home loans. Lots were provided free and the homeowner was required to pay taxes only on the home, not the land.

After George Hearst died in 1891, his majority ownership in Homestake Mining shares was inherited by his wife Phoebe, 22 years his junior. An educated and strong-willed woman whose social views were quite advanced for her era, she probably deserves much of the credit for the enlightened attitude subsequently adopted by senior management. In particular, she had strong ideas about industrial relations and the treatment of workers. Her policies were largely carried out by her protégé, a relative named Edward H. Clark, who served as a Homestake director for half a century (1894-1944) and as president for the last 30 years.

Phoebe’s particular interests were in the fields of education and the general health of the workers. In 1894, she established a free library that subscribed to over 80 magazines and newspapers, many in foreign languages to serve the many nationalities represented in the workforce. In 1900, she established a free kindergarten, and provided generous support for churches and schools. She also believed in the ‘Americanization’ of the workers and their families by assisting them in learning English and qualifying for citizenship. To that end, night schools were introduced in 1906.

A free community centre was built in 1914 that included a pool hall, card room, gymnasium, bowling alley, theatre and swimming pool, while a recreation commission operated by the workers supported baseball, basketball, skating, rifle and pistol ranges, skiing and golf. Disability and sickness insurance were introduced in 1910 and retirement pensions in 1917, and after 1920, medical care was free. The Hearst family involvement in the company ended when Phoebe’s son, William Randolph, sold the Homestake interest after her death from influenza in 1919. However, it continued its progressive and pioneering labour relations policies.

According to a report by John R. Commons, Chairman of the U.S. Commission on Industrial Relations, Homestake’s welfare measures were far ahead of anything available in any similar industrial centres (Engineering & Mining Journal, August 8, 1914, p. 324 and October 2, 1914, p. 616). These working conditions at Lead, which were incomparably superior to those at Butte, have been described as “benevolent despotism.” They had only one negative condition — “that the miner shall have nothing to say about it himself.” The Homestake system of labour relations was, in effect, a welfare state that paid great dividends in workforce stability and productivity but avoided exploiting the workers. It also showed that treating workers decently was not terribly expensive.

Other gold mineralization in the Black Hills

In addition to the Homestake mine, the northern part of the Black Hills contains significant gold deposits of Tertiary age, although their production has been relatively small. These are generally oxidized replacements with manto-like shapes hosted by dolomite and limestone horizons of the Cambrian Deadwood Formation. The deposits display both structural and stratigraphic controls, are transected by higher grade mineralization in vertical fractures, and commonly have a close spatial association with Tertiary intrusions. In addition to size, the Tertiary ore bodies differ from the Homestake deposit in their lower average grades; lower gold to silver ratios (generally below 1:1); their sulphide composition, with pyrite as the dominant mineral; and their significant lead-zinc concentrations with traces of tungsten and telluride minerals.

In 1983, Wharf Resources introduced open pit mining and heap leaching with cyanide into the Black Hills at a mine in the Bald Mountain district, five kilometres southwest of Lead. Mineralization was discovered there in 1877 and about five million tonnes, with an average recovered grade of 6.5 g/t (0.19 oz/ton) gold and 17.5 g/t (0.51 oz/ton) silver, was mined intermittently between 1901 and 1959, some of which was treated in a small cyanide mill prior to 1915. Exploration was resumed around the former mines by a joint venture between Homestake and a Wharf predecessor in 1974 and continued after Wharf purchased the Homestake interest in 1979. To the end of 2007, Wharf had mined about 69 million tonnes, with an average grade of 1.1 g/t (0.032 oz/ton) from six separate zones with an average strip ratio of 1.85 to 1. It was processed on leach pads to recover approximately 1.81 million ounces of gold. Between 1983 and 1996, the recovery rate was about 76 per cent. A Canadian company, Goldcorp Inc. (formerly Dickenson Mines) has controlled Wharf since 1988. It has reported that sufficient reserves exist to operate until the end of 2010, at which time gold production may cease in the Black Hills for the first time in over 135 years.

Between 1989 and 1996, Wharf also operated a nearby mine, the Golden Reward, situated about one kilometre east of the mine discussed above, on the opposite side of a ski development. It recovered 276,000 ounces of gold and 361,000 ounces of silver from similar mineralization.

Another noteworthy gold producer in the Black Hills was the Deadwood camp, which produced about 285,000 ounces, starting in 1875. Most of this was placer gold from Deadwood Gulch, although a small amount came from three neighbouring creeks and tributaries. The first lode gold came from the Hidden Treasure mine, a so-called placer deposit at the base of the Deadwood Formation that was actually a gold-bearing conglomerate horizon of detrital origin that overlies and was probably derived from erosion of the Homestake Formation. It was treated in the first stamp mill to reach the Black Hills in September 1876 and produced about 1,000 ounces within a year. By 1878, 20 mills with 500 stamps were in operation, but lode mining ceased by 1881 when the ore was exhausted. The total amount of gold recovered is unknown. The equipment was presumably moved to the Homestake camp.

The Mascot mine, situated four kilometres southeast of Deadwood, was discovered in 1892, and the nearby Oro Fino deposit of Gilt Edge Mines Inc. was located the next year. The Tertiary Mascot ore is hosted by carbonate rocks of the Deadwood Formation, similar to the ore at the Wharf mine, whereas the adjacent Gilt Edge ore occurs in Tertiary intrusive rocks. Modern exploration of the Gilt Edge mine by Brohm Mining Corp. and Minven Gold Corp. in the 1980s outlined an oxide reserve of 6.2 million tonnes, with an average grade of 1.6 g/t (0.046 oz/ ton) gold. An open pit mine with a cyanide heap leach that opened in October 1988 was terminated almost immediately because of an acid rock drainage problem.

Four other camps in the district produced minor amounts of gold. The Cloverleaf mine on Elk Creek, about 13 kilometres southeast of Deadwood, produced about 44,000 ounces between 1878 and 1937, mostly before 1890, from a saddle-shaped mass of quartz containing native gold with galena, sphalerite and pyrite in the Proterozoic rocks. Another is the Ragged Top camp, about 11 kilometres northwest of Lead, which produced about 75,000 ounces between 1885 and 1906 from silicified breccias hosted in karst-like zones with narrow vertical feeder veins. The occurrences are hosted by silicified Mississippian limestone, contain traces of telluride minerals, and are associated with Tertiary porphyry bodies and a phonolite laccolith. The others are the Keystone camp, situated about 55 kilometres southeast of Lead, which produced about 130,000 ounces, mainly between 1892 and 1903, and the Hill City camp, about 15 kilometres closer to Lead, which produced about 35,000 ounces. Both are hosted by Proterozoic schist.

Impact of the Homestake camp on economic geology

The complex structural deformation and higher grade metamorphism at the Homestake mine had seldom been encountered before within major European or U.S. mining districts, except perhaps in the Alps. It presented a new and difficult challenge to prospectors, miners and geologists searching for extensions of surface mineralization and determining its origin. Solving those problems represented an important advance in the field of economic geology. Study of the Homestake mine was a precursor, in a way, of the geological tools that would be required to explore mineral deposits in the prolific Proterozoic and Achaean gold and base metal camps of the Canadian Shield, and in other strongly deformed rocks worldwide. By lowering the economic cut-off grade for gold mining through improved mining and recovery methods, the Homestake mine expanded the scope of future mining ventures. As a result, many more opportunities were created in the field of economic geology through the study of new deposits.

The information on the industrial relations of the Homestake Mining Company has been derived from Cash (1973), Fielder (1970) and Robbins (1994). The descriptions of the other mines in the Black Hills was obtained from Koschmann and Bergendahl (1968), from published records of Wharf Resources and from personal communications with Jim Lessard, exploration/land manager, and R.E. ‘Dutch’ Van Tassell, former vice president of exploration, Wharf Resources.